The Deficit Debate and Our Broken Medical Care System

Imagine a nation with a terrible problem — one its leaders refuse to discuss. The problem will needlessly drain trillions of dollars from its economy in the next ten years.

Now imagine that this problem also robs that nation’s citizens of life itself, draining years from their lifespans while depriving them of large sums of money. Imagine that it sickens and disables countless others, drives many people into bankruptcy, and kills more than two newborn infants out of every thousand born.

Imagine that fixing this problem would result in a dramatic decline in publicly-held debt. It wouldn’t just “help” the debt problem, mind you — it would cause that debt toplunge.

And now imagine a national “deficit debate” which completely ignores this problem.

Imagine a news media which pretends the problem doesn’t exist. Imagine a corporate-funded “Fix the Debt” movement that refuses to mention it, and yet is treated as an objective source of information. Imagine a political consensus in which the debate isn’t around how to fix this problem, but how to cut service programs that help people cope with it.

Welcome to the United States of America, January 2013. It’s a land where the population is broke, sick, cheated and mistreated. But the problem’s fixable — if we can find the political will.

Broke

The problem, of course, is our health care system — although “system” seems like a flattering word for this greed-driven, anarchic three-ring circus. Our health care system — guess we’ll need to call it that for lack of an alternative — is the worst in the developed world. It costs far more, provides much less, and has worse outcomes than any system that’s even remotely comparable.

How bad is it?

Our health care spending is 17.6 percent of GDP, compared with an average of 9.6 percent for all developed countries. (All figures are from the compendium of health and economic statistics published by the Organization for Economic Cooperation and Development (OECD), unless otherwise indicated.)

Total health spending (from all sources, not just insurance-related) averages $7,960 per person in the United States, versus an average of $3,233 for all developed countries.

If we spent the same on health as the average developed country (as a percentage of GDP) that would inject more than a trillion dollars per year into other parts of the economy. ( $1.14 trillion, by my rough calculation.)

Sick

What are we getting for our money?

Life expectancy at birth in the United States is 78.2 years, compared with an OECD average of 79.5 years and Japan’s life expectancy of 83 years.Our expected lifespan is the shortest of any among the countries we normally think of as “developed.” The ones that trail us are newer entrants into the “developed” category — like Mexico, Turkey, Brazil, Indonesia and the Eastern European countries.

Our infant mortality rate is 6.5 deaths per 1,000 live births, as opposed to the OECD average of 4.4 deaths. As with life expectancy, we lag behind all the other long-term “developed” nations.

We score even more poorly on another metric, “Premature Mortality,” which measures the number of years someone loses “before their time” (essentially by calculating how many years it would have taken on average to reach the age of 70).

Our high rates of premature mortality are affected by our high rates of accidents and suicide, too, and from a homicide rate for males that’s five times the average. (That’s a figure worth citing in the gun control debate.)

Cheated

The question becomes, Why? Why do we pay so much and get so little for our money?

Part of the answer lies in the fact that, despite the high cost of private-insurance premiums, our health plans don’t provide enough coverage. According to survey data, Americans were unable to meet their medical needs because of cost more often than citizens of ten comparable countries (OECD, Table 6.1.3).

That statistic applied to lower-income Americans, as might be expected. But interestingly, it was also true for higher-income Americans — those who are most likely to have private health insurance. Thirty-nine percent of Americans with higher-than-average income had an unmet medical need due to cost in 2010. For the runner-up, Germany, that figure was 27 percent. (It was 12 percent in Switzlerland and 4 percent in Great Britain.)

Higher-income Americans also led the pack in reporting out-of-pocket expenditures of $1,000 or more per year, along with their lower-income peers, with 45 percent in the higher-earner category spending that much or more per year. The figure was 37 percent for runner-up Switzerland. It was 2 percent in Sweden. And in much-reviled “socialist” Great Britain the figure was effectively zero.

These results reinforce the findings of studies on medical bankruptcies by Prof. Elizabeth Warren, which showed that medical costs were a dominant reason for bankruptcy even for people with health insurance. (She was officially sworn in as Senator Warren today — congratulations!)

Mistreated

Where does all the money go? Much of it goes to profit margins for private insurance companies, of course. (They’re experts at understanding their margins, which are much higher than most observers believe.) There are also profit margins for a number of health providers, including for-profit hospitals, medical imaging companies and physician practice management groups.

Underlying much of our explosive cost growth is the phenomenon we described in “Sick Money:” Investors like Bain Capital buy up health care companies, load them up with debt, and demand highly aggressive profit margins. Many of them respond to the problem the way the Bain companies did in our piece: through fraud.

But many other providers overtreat, subjecting the population to a barrage of needless (and sometimes invasive) procedures while other basic health needs go unmet.

Here are two more OECD statistics that illustrate the point:

The United States is second only to technology-crazed Japan in the prevalence of high-cost (and high profit) MRI and CT devices for medical imaging, both in hospitals and in free-standing facilities. Many American facilities were financed by physicians who send their patients there, which poses a significant conflict of interest and which both public and private insurers have been attempting to limit. Many others are owned by sales-driven chains. Unsurprisingly, studies suggest there is significant overuse of this equipment in the United States.

And let’s not forget drugs. When it comes to per-person pharmaceutical costs the United States is off the charts, spending $947 per person on average. That’s nearly twice the OECD average of $487.

And remember: Congress won’t even let Medicare negotiate with the drug companies.

Fixable

Our “sick secret” can be fixed. In our next post we’ll discuss how to attack it — and what it will take to shift the debate away from a “consensus” plan to adopt the miserly failures of austerity and toward real solutions that can restore our Federal budget — and us — to health.

About Richard Eskow

Richard (RJ) Eskow is a former executive with experience in health care, benefits, and risk management, finance, and information technology. He is a Senior Fellow with the Campaign for America's Future and hosts The Breakdown, which is broadcast on We Act Radio in Washington DC.

Richard worked for AIG and other insurance, risk management, and financial organizations. He was also a public policy and finance/economics consultant, in the US and over 20 countries. Past clients include USAID, the World Bank, the State Department, the Harvard School of International Public Health, the Government of Hungary, as well as corporations and investors. He has experience in financial and numerical analysis (of benefit plans, financial risk, corporate investments), systems design, and management.

Richard has worked on long-range health policy and forecasting. His predictions are included in the recently-released Rough Guide To the Future in it's review of "the hopes, fears, and best prediction of fifty of the world's leading futurologists."

Richard is also a freelance writer. He's a regular columnist for the science and culture blog 3 Quarks Daily and a Contributing Editor for Tricycle magazine. His reflections on blogging and spiritual principles were included in Best Buddhist Writing of 2008.

Richard's also an (occasionally) working musician and songwriter who appeared regularly at venues such as CBGB's, the Washington Folk Festival, and motorcycle shows throughout the American South from 1970 through the year 2000. His last appearance was as the "opening act" for Gen. Wesley Clark in 2007, but he may be available again for the right price - or the right cause.
He can be reached at "rjeskow@gmail.com." His Twitter ID is "@rjeskow."

Wellness

Carole Bartolotto: The problem with concluding that GMOs are safe is that the argument for their safety rests solely on animal studies. These studies are offered as evidence that the debate over GMOs is over. Nothing could be further from the truth.

Environmentalism

Walker Foley: Elected officials seem to think there’s only one side of this property rights argument. The people who live in these communities have rights too, but the oil companies seem to have the jump on [the politicians’] side of the fence.